The stock was down 0.2 per cent at Rs 245.50 in afternoon trade on Wednesday.
The government has decided to form an expert group with representation from other ministries, which will analyse existing tax structure on all tobacco forms and suggest options of tax rate for February 2022 Budget and thereafter. Analysts at Jefferies said that while there is no visibility on the outcome, the news flow has raised uncertainty till the Budget, keeping ITC range-bound.
“It is near-impossible to predict what the expert group would recommend and what the government will implement at this stage. However, this has clearly raised concerns on tobacco taxation in the run-up to the Budget on 1 Feb 22,” said Jefferies.
Notwithstanding the concern until the Budget, the outcome need not be only negative as tobacco taxation is already high in India, said Jefferies. The brokerage said that the expert group may even prescribe harsher measures on the non-cigarette category, which is nearly 90 per cent of overall tobacco consumption in India but contribute a fraction to overall taxes.
An aggressive tax hike on cigarettes remains a risk on the downside, said Jefferies.
